The Washington Post, which regularly uses both its editorial and news pages to push for budget cuts, has a front page article today that warns the United States could end up like Greece. The article includes a quote from University of Maryland economist Peter Morici, telling readers that:

"If Congress raises the debt ceiling without a long-term plan for reducing the federal deficit, he added, 'they’ll never solve the problem, and we’ll end up like Greece.'"

It would have been worth pointing out that the United States cannot end up like Greece because the United States, unlike Greece, has its own currency. Greece is like the state of Ohio. If it has a shortfall it has to borrow in financial markets. Ohio can appeal to the federal government for assistance, just as Greece can turn to the EU, the ECB, and the IMF, but both have to accept whatever terms these bodies impose as a condition for their support.

By contrast, the U.S. government is always free to buy up debt issued in its own currency through the Fed. In principle, this could lead to a problem of inflation, however the economy is very far from reaching this point with a vast amount of unemployed labor and under-utilized capacity.

Of course, the U.S. government also has no difficulty whatsoever borrowing in financial markets. It is currently able to sell long-term debt at interest rates just over 3 percent. This means that the people investing trillions of dollars in these markets do not share Mr. Morici's assessment of the fiscal situation of the U.S. government.

It would have been worth presenting the views of someone who could tell the difference between the United States and Greece in this article.

That's what readers of the NYT's box on "issues holding up debt ceiling agreement" would conclude. The box tells readers that:

"Officials have said that the program, which provides health care to people 65 and older, is not sustainable in its current form."

This is not true. There is no, as in zero, none, official document that says the program is not sustainable in its current form. There are official documents that show the program will need additional revenue at some point. The ACA passed by Congress last year reduced the projected shortfall in the program by more than 75 percent.

As it stands, the projected shortfall over the program's 75-year planning horizon is less than 0.4 percent of GDP. This is less than one quarter of the cost of the wars in Iraq and Afghanistan.

Yes, the United States has officially been asking (demanding?, begging?) China to raise the value of its currency against the dollar. Yet, the media continually threaten the country with the story that China may sour on the U.S. and stop buying U.S. debt if we don't get our budget deficit down.

However, if China stopped buying U.S. debt it would lead to a rise of the yuan against the dollar. This is exactly what the Obama administration has ostensibly been asking them to do.

In other words, China has no leverage in this picture. Their implicit threat is to do exactly what we supposedly want them to do. So why is the media trying to scare us?

Nicholas Kristof is mostly on the mark in his column this morning, but he does repeat the Clinton fiscal responsibility balanced the budget myth. This is not true.

An examination of the Congressional Budget Office's (CBO) projections from the 1990s shows that in 1996 CBO still projected a deficit of 2.7 percent of GDP for fiscal year 2000. Instead, we had a surplus of 2.4 percent of GDP, a shift of 5.1 percentage points of GDP (@$750 billion in today's economy).

This shift did not come about from tax increases or spending cuts. CBO estimates that the tax and spending changes between 1996 and 2000 added $10 billion to the year 2000 deficit. The shift was entirely attributable to faster than expected economic growth and especially the decision by Federal Reserve Board chairman to allow the unemployment rate to fall to 4.0 percent.

CBO had projected an unemployment rate of 6.0 percent for 2000. This was the conventional estimate of the NAIRU (non-accelerating inflation rate of unemployment) at the time. It was only because Greenspan ignored this nearly universally held view in the economics profession (and the Clinton appointees to the Fed) that the economy was able to grow enough to get the unemployment rate down to 4.0 percent and to bring the budget from deficit to surplus.

Glenn Kessler, the Post's Fact Checker, did a nice job trying to pin down the law on whether Social Security benefits can still be paid once we have hit the debt ceiling. This is a tough one because payment of benefits would draw down the trust fund, which is part of the $14.3 trillion debt, dollar for dollar. This means that they would not add to the debt and push the government over the ceiling. Still, it is not entirely clear that the payments would be kosher.

That's what folks should be asking Jon Stewart. The United States as a country owes China money because it has a trade deficit. The trade deficit means that United States would be borrowing from China even if it had a balanced budget, as for example was the case in 1999 and 2000. The fact that China happens to hold a lot of Treasury bonds simply is the result of what U.S. assets they choose to hold. They could, and do, also buy private bonds, stock and other assets.

Of course the trade deficit is high due to the over-valued dollar. This in turn is partly the result of the fact that China and other countries have a policy of keeping the dollar high by buying up assets like U.S. Treasury bonds.

All of this may be way too much depth for a comedy show, but how about leaving China out of the story? We have a lot of China bashers in this country. There are reasons to object to many of China's policies (I certainly do), but do we need to throw China into the picture gratuitously? After all, John Boehner, Eric Cantor, and Barack Obama would seem to provide plenty of comedic material.

We no longer have to wait to see how the battle over the debt ceiling will turn out, the Washington Post already told us:

"No matter what the outlines are for a final agreement to lift the debt ceiling, the deal will include cuts to some of the nation’s major entitlement programs: Medicare, Medicaid and Social Security."

There you have it, right there in the first sentence of a Washington Post article.

This piece also told readers in the context of a discussion of lowering the Social Security cost of living adjustment:

"experts have long argued that the formula [the current consumer price index] overstates inflation because it does not take into account changes in consumer behavior in response to rising prices."

While some experts have argued this point, other experts have noted that research from the Bureau of Labor Statistics (BLS) showing that consumption patterns among the elderly are substantially different from the consumption patterns of the rest of the population. These experts have suggested that if the concern is making the cost of living adjustment more accurate (as opposed to just cutting it), Congress could just instruct BLS to construct a cost of living index that was based on the consumption patterns of Social Security beneficiaries.

Such an index may show a rate of inflation that is higher or lower than the current index. It would be impossible to know for sure without first doing the research. However, there is no doubt that such an index would be more accurate than the current one for measuring changes in the cost of living of the elderly.

The Commerce Department reported that the trade deficit jumped in May to $50.2 billion from $43.6 billion in April. The monthly data are erratic, but this is definitely bad news. This means that growth in the U.S. economy is likely to be very weak in the second quarter. (Measured in constant dollars, the deficit increased by $3.9 billion.) It does not look like trade is about to become a major driver of growth and jobs.

This is also bad news for fans of income accounting. If we have a trade deficit, then national savings must be negative. That means either or both negative private savings or negative public savings (e.g. budget deficits). That's the rules -- there is no way around this one.

But this one didn't get much attention in the media. I couldn't find the NYT piece on the deficit. The Post had a piece on the May trade numbers, but it worked hard to get us the good news:

"But rising imports aren’t necessarily bad, because they can indicate the overall direction of demand for goods and services. Some analysts see crude oil, which accounted for more than two-thirds of May’s increase in imports, as a positive read for the economy.

'It indicates demand is stronger,' said Linda Duessel, equity market strategist at Federated Investors in Pittsburgh. 'That’s a good thing here in the U.S.'"

Actually, most of the increase in oil imports came about as the result of higher oil prices, not the need for more oil to fuel the economy. While the volume of oil imports in May was down from its April level, it is more than 9 percent below the average for the first quarter of the year.

It would have been worth reminding readers that the debt crisis in Italy and other euro zone countries is first and foremost a political crisis. The European Central Bank (ECB) can just print euros which can be used to address any potential default risk among its member countries. There would be little obvious economic downside to this policy since most European counties have large amounts of unemployment and excess capacity due to inadequate demand.

If there is a risk of default it is because the ECB has decided to make an obsession out of its 2 percent inflation target. This shows that numerology can be a very dangerous religion when it is held by central bankers.

That seems to be Ruth Marcus's argument in her column today. The point is that he needs money for his education and infrastructure agenda, but he will only get this money if he commits to make large cuts, including in areas like education and infrastructure. Okay, no one expects the Washington Post to make much sense, but does anyone have any idea what she is talking about?